A BEJTE Topics article.

Abstract

Many goods have network externalities. When the number of agents possessing such goods is small, the agents may not gain sufficient utility from the goods. Agents then have an incentive to delay their purchasing decisions. Such delays have negative effects on the agents' utility, so equilibrium with delays is inefficient. We propose a method of resolving this problem using a two-step scheme with participation fees and subsidies. If this method is used, and certain conditions are satisfied, all agents purchase the good and the delay in equilibrium decreases.

Submitted: July 2, 2008 · Accepted: January 16, 2009 · Published: February 13, 2009

Recommended Citation

Shichijo, Tatsuhiro and Nakayama, Yuji (2009) "A Two-Step Subsidy Scheme to Overcome Network Externalities in a Dynamic Game," The B.E. Journal of Theoretical Economics: Vol. 9 : Iss. 1 (Topics), Article 4.
DOI: 10.2202/1935-1704.1496
Available at: http://www.bepress.com/bejte/vol9/iss1/art4